The economy is so interdependent and inter related, that no one can easily foresee how government interference will have an impact. But some actions will cause reactions that any first year economic student can predict.
The current cry to protect the home owner from the interest rate escalations he agreed to in a written contract will only serve to reduce the mortgage pool available and make it ever harder for the lower income home buyer to secure a mortgage. These mortgages with their terms are sold on the market, and the prospect of the government interfering in a way that reduces their market value will cause the securities to be priced with a risk premium that will flow to the mortgagee.
The Family Medical Leave act serves to increase the cost of hiring young married people in their child bearing years, thus reducing either their chances of being hired or the compensation when they are hired. Similarly the Americans with Disabilities Act has reduced the number of workers with disabilities getting hired because of the increased costs and threat of litigation thrust of the employers.
Even the Endangered Species Act has had the opposite consequence intended, reducing the habitats for protected species. How so? Because it is more cost effective to clear cut property than to totally lose control of it because some rare species of owl pitched a nest there.
Given the history of government passing well intentioned but economically clumsy laws that end up hurting the very constituency they seek to protect, what do you expect to happen when the government gets their ham-fisted paws on our healthcare system?
Tips to The Grand Poobah for the NYT article, “Unintended Consequences” by Stephen Dubner and Steven Levitt
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